Tendering for Success

Early management of information in a capital project is paramount to setting the project up for success.

Conversely, failure to pay adequate attention to information management introduces risks that, if realised, can have significant consequences. Further, a 2013 PwC analysis of 36 companies across multiple sectors has revealed that after a public announcement of a capital project delay or shutdown, a majority of companies experience a steady decline in share price. By the three-month mark following the announcement, the decline in share price averages 12 percent.

One of the most important aspects of a capital project – and one of the most costly when it does go wrong– is the tendering process. Sometimes referred to as the “bidding”, the “bid process” or “pre-award contract processes”, the tendering process covers tender preparation through to contract award.

One of the greatest opportunities to influence the performance outcome of a capital project is at the tendering stage, where the requirements and assumptions play into the commercial agreement for project delivery.

Typically, owner organisations give little consideration to the systems that support and manage the tendering process and associated governance and assurance, and instead tend to rely on one of the following:

  • Email and FTP sites
  • Procurement systems that are designed for obtaining consumables and materials associated with the operation and maintenance of a production facility (in other words, systems which are not designed to handle the volume and complexity of information that is an inherent part of the EPC tendering process).

At this early stage of the project, owner organisations need to provide potential tenderers with conceptual designs, technical requirements, owner information, commercial models, and terms and conditions on which to base their tender.

As the sums of money involved here are in the hundreds of millions, if not billions of dollars, omitting information or supplying incorrect information as part of the tender package can be expensive for one or both parties.

The tender process

The tender package will generally consist of hundreds or thousands of documents and drawings that need to be securely distributed to the tenderers across the globe.

It is not uncommon for an EPC tender to have hundreds of clarifications, many of which need a team comprising a subject matter expert and commercial lead to respond to.

Multiply this by the number of tenderers, and you have a significant volume of information that needs to be conveyed in a diligent and confidential manner.

Careful consolidation and management of the detailed clarifications that extend over the prolonged bid process makes for improved resolution and/or avoidance of contractual issues if and when they arise.

On the larger tender programs, tenderers will invest significant sums of their own money to submit a tender response. They therefore need to be comfortable that the tender submission and intellectual property they submit are treated with due confidentiality. The onus is on the owner organisation to demonstrate probity – or else risk the possibility of a law suit or the tenderer declining to tender.

The amount of project investment required is now of such a scale that most projects will involve partnerships. These partners require assurance that their investment is being managed with the appropriate level of diligence and oversight.

Key Challenges of the Capital Project Tendering Process:

  1. Significant sums of money involved – hundreds of millions or billions of dollars
  2. EPC tendering process (including preparation) can extend well beyond 12 months
  3. Hundreds of clarifications requiring subject matter expert and commercial lead input
  4. Multiple competing tenders means information management requirements are amplified
  5. Tenderers base their tender on the information supplied and clarified during the bid process
  6. Partners require assurance that appropriate diligence is/has been applied
  7. Probity requirements mean that an audit trail may need to be produced assuring access control and confidentiality
  8. Tenderers are generally remotely located from your project and can be spread across the globe

Conclusion

Systems with a tender module, such as Aconex, are built specifically for the intricate requirements of capital projects. They allow organisations to cost effectively and expediently put in place the foundations to support the tendering process of these capital projects, enabling control over the tendering process and improving the chances of a successful project outcome.

While using email and FTP sites may seem convenient initially, these sites fail to provide any governance, assurance or oversight to the capital project tender process – except through the injection of significant manual processes that are time consuming, error prone, and do not provide an audit trail of any integrity…[Read More]

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